Cyprus Mail
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Our View: Bondholders get their wrongs right

Representatives of the bondholders

THE BANK of Cyprus and Laiki Bank bondholders have become a fixture in public life. Every few weeks they will do something that will get them in the news. In the past, they held angry gatherings in the open, they’ve stormed the Bank of Cyprus headquarters in Nicosia, occupied the legislature and held angry protests outside the presidential palace. In recent months, they have become more low-key in their activities, having decided that angry and threatening behaviour was unlikely to achieve their objectives.

Their objective is to be paid back some of the money they had invested in bank bonds, long before the collapse of the two main banks, because of the high interest they were collecting (in some cases as much as 7 percent). After the collapse of Laiki and the bail-in of BoC depositors, the bonds became worthless and the holders have been demanding compensation on the dubious grounds that they had been deceived by the banks. Proving this in a court would be rather difficult, considering the banks had also provided detailed prospectuses for the bond issues explaining in detail the possible risks involved.

Aware that legal action against the BoC could prove costly and was not guaranteed to succeed, the Bondholders’ Association tried to pressure the politicians into helping them out, especially as there were elections on the horizon. The ploy worked and political parties drafted a bill, which was approved in the last session of the outgoing legislature, allowing bondholders to offset the original value of their bonds against bank loans they had. The bill discriminated against bondholders who did not have bank loans, among other things, and the president sent it back to the legislature.

Now, the association is considering legal action again, but wants the state to increase the amount it has offered as legal aid. The association’s leader met President Anastasiades who said the government could help. In addition, the bondholders are demanding a change of the Cyprus legislation to allow class actions on the bonds. But as passing the relevant legislation for class action might take a long time and the state legal aid might not be enough to cover lawyers’ bills, on Monday the association made a plea for a meeting with Anastasiades, to discuss an out-of-court settlement.

But if bondholders want an out-of-court settlement, should they not first take the case to court? And why seek such a settlement with the government which had nothing to do with the bonds in the first place? Is it because the bondholders want the taxpayer to compensate them for their unwise investments motivated by greed? Since when do people that make bad investments have the right to claim compensation from the taxpayer?

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